UK dismisses Indian airline’s appeal

The UK has dismissed an appeal from an Indian airline over charges that it failed to report emissions from its intra-European flights in 2012, a decision that may set a precedent for other British-registered carriers challenging the validity of the EU’s aviation carbon market.

Mumbai-based Jet Airways, India’s second largest airline both in terms of market share and passenger numbers, faces penalties that could top €16,000 for not reporting its emissions from flights operated between five European airports in 2012.

The UK’s Environment Agency (EA) issued a “notice of determination” to Jet in June 2014 relating to 150 tonnes of carbon dioxide emitted by the airline that year, a stage in the disciplinary process that can result in fines of €100 per tonne plus the cost of the unsurrendered allowances, the revoking of an airline’s operating licence, or the impounding and sale of aircraft.

Governments in other EU nations including Germany, France and the Netherlands also appear to be casting their apathy aside and going after delinquent foreign airlines.

While its own impending fine is small by corporate standards, Jet challenged it, citing directions from the Indian government and work launched by the UN’s civil aviation body ICAO in 2013 to design a global market-based mechanism for the sector, which accounts for less than 5% of manmade greenhouse gases annually. Other non-compliant airlines have cited a similar defence.

“Jet’s central point is that unilateral action does not accord with the global consensus as evidenced in ICAO,” wrote David Hart QC, who was appointed by the UK’s Secretary of State for Energy and Climate Change to rule on the matter.

In his decision dated Mar. 27, Hart also noted that the Indian government in April 2012 formally prohibited carriers from participating in the EU ETS, and last year ordered them not to share emissions data or any other information with EU countries.
“I see nothing … which suggests that the directions of the Government of India are binding in law on Jet, even though I quite understand why politically Jet may wish to adhere to them if it can,” he wrote in the document, which was published today by the UK Department of Energy and Climate Change.

NON-BINDING

The EA argued that the resolution passed by ICAO in 2013, which sought to supplant national or regional action against airline emissions with a global scheme, was also not legally-binding.

This echoed a 2011 EU Court of Justice opinion, which found the EU’s scheme was legal under international law and that recent ICAO resolutions were at most non-binding political declarations.

“I see nothing about the resolution within (ICAO’s 2013) Assembly which would lead me to a different conclusion,” Hart said, adding that neither national courts nor he had the legal power to declare the EU’s aviation law as invalid.

The EU scaled back its airline carbon market in 2012, from covering all flights using European airports to only those flying between them, amid claims the scheme infringed on the sovereignty of other countries and protests that threatened to trigger an all-out trade war.

The bloc also delayed the compliance deadline for 2013 and 2014 emissions from those carriers still regulated under the programme until Apr. 30, 2015.

FINAL STRAW?

Jet was allocated just over 1 million free EUAAs by the UK government for its 2012 emissions, just 36 tonnes of which applied to intra-European flights, Hart wrote. But because Jet hadn’t opened an Aircraft Operator Holding account in the bloc’s emissions trading registry, it never received them.

Fellow carrier Air India also failed to report its 2012 emissions or open a registry account in time, but it was unclear whether the airline has challenged the EA’s notice against it.

“It’s unclear where we go from here since there’s no aviation precedent, but this is likely the final straw (for airlines) as there appears to be no other avenues for further appeal,” said Barry Moss, director of Avocet Risk Management, a consultancy that monitors EU ETS aviation compliance on behalf of aircraft lessors and owners.

“The question is whether the UK government will try to smooth the whole thing over, or whether they’ll uphold the law for both European and non-European operators alike.”

The Environment Agency was unable to immediately comment on the matter.

NAMING AND SHAMING

“It’s all been a bit tricky with the ICAO talks going on, as the EU is trying not to antagonise those negotiations,” Moss added.

European governments have previously been reluctant to publicly name delinquent operators over concerns it could tarnish the ICAO talks, but that sensitivity appears to be waning as some foreign airlines flying within Europe continue to flout the rules.

Earlier this month, Germany published a list of 44 aircraft operators that face fines totalling €5.4 million for not complying in 2012.

Notably absent were Air China or Aeroflot, Russia’s flagship carrier that last year balked at paying a €215,000 fine to Germany, where it is registered in Europe.

Like India, China and Russia continue to prohibit their airlines from complying with the EU scheme.

However, US airlines, which are under similar guidance from American lawmakers, are largely complying with the EU’s slimmed-down law for their intra-European flights, according to aviation news service Green Air Online.

The publication also reported that France is understood to have started fining its non-compliant airlines, while Flemish authorities are believed to have hit Saudi Arabian Airlines, or Saudia, with an €800,000 penalty.

Meanwhile, Ireland’s government is reportedly not pursuing non-compliant airlines that have emitted less than 1,000 tonnes, citing the procedural costs versus the size of the potential fines.

Please do not hesitate to contact Avocet should you require additional information concerning this article or any other aviation EU ETS compliance issues.
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